BlackRock dumps $1 billion stake in Meridian and Contact

Trading volumes surged and the market edged higher as passive fund manager BlackRock sold more than $1 billion worth of shares in Contact Energy and Meridian Energy.

Friday, April 16th 2021, 6:52PM

by BusinessDesk

The S&P/NZX 50 Index rose 48.2 points, or 0.3%, to 12,684.73. Within the index, 23 stocks rose, 19 fell and eight were unchanged. Turnover was an enormous $1.4b.

Renewable electricity generator, Meridian Energy saw more than 106 million shares change hands, or 4.1% of all shares on issue, pushing its price up 0.8% to $6.05.

Another 81.5 million Contact Energy shares were bought and sold, or 10.4% of all shares, as the stock climbed 2.4% to $7.68.

Matthew Goodson, a director at Salt Funds, said a “tremendous amount of prepositioning” from active investors had helped the price to stay stable.

“One thing that was predictable was that the volumes involved would be huge,” he said.

Today, was the final act in a five-month drama that has sent supposedly stable electricity generators on a rollercoaster share price ride.

It started when investors started piling into a BlackRock clean energy exchange-traded fund after the Democratic party won the US elections late last year.

BlackRock’s ETFs are based on S&P Dow Jones’s Global Clean Energy Index which had Meridian Energy and Contact Energy as two of its largest stocks.

The money being pumped into the ETFs flooded the local market during the summer holidays while many traders were not available to sell into the surge.

BlackRock wound up owning more than 7% of Meridian and more than 14% of Contact.

This caused a liquidity shock which saw the world’s largest fund manager buying shares in a state-owned utility firm for as much as $9.50 in early January, up more than 40% from a month prior.

S&P realised the clean energy ETFs were inflating the price of these stocks and has redesigned its index to include an additional 51 stocks.

The new stocks were added to the index today, triggering a mass exodus from the two Kiwi electricity generators as passive fund managers were required to sell their oversized stakes.

Both stocks saw their share prices hold up under the selling pressure, as investors had been preparing for the big trade months in advance.

Infratil shares rose 0.2% to $7.01 with 4 million shares traded, as media reports suggested a better offer for its clean energy asset Tilt Renewables had been made.

The renewable energy firm was set to be sold for $2.9b to Mercury NZ and Australian company PowAR, but a Canadian pension fund has lobbed an unexpected $3b offer at the last minute.

The kiwi dollar was trading 71.62 US cents at 5pm in Wellington, up from 71.48 cents yesterday.

The trade-weighted index was at 74.83 at 5pm, from 74.77 yesterday. The kiwi traded at 92.51 Australian cents from 92.60 cents, 77.94 yen from 77.84 yen, 59.85 euro cents from 59.66 cents, 52.02 British pence from 51.87 pence, and 4.6728 Chinese yuan from 4.6722 yuan.

Tags: Market Close